Foreign Capital Retreated from China’s Real Estate Market in 2016

A cooldown comes amid the country’s efforts to curb investments

Foreign capital made a rapid exodus from China’s real estate market in 2016 in anticipation of a slowdown amid the country’s curbing efforts.

The total funds for real estate development enterprises in China reached 14,421 billion yuan (about US$2,104 billion) last year, a 15.2% increase year-over-year, but foreign capital was reduced 52.6% to 14 billion yuan (about US$2 billion), according to data published by China’s National Bureau of Statistics over the weekend.

During the fourth quarter of 2016, the real estate sector growth dropped to 7.7% from the 8.8% recorded in the previous quarter, suggesting the market was responsive to the government’s cooling measures.

Since last fall, about 20 Chinese cities have rolled out policies, including raising down-payment requirements and banning non-residents from purchasing a second home, all to avoid a possible housing bubble.

The real estate industry has been a major driver in China’s economic growth over the last decade, accounting for 14.2% of the country’s GDP in 2015, according to government data. By comparison, the figure was 8.9% in 2006. Residential buildings make up more than two-thirds of the real estate sector.

But the slowdown in the real estate market hasn’t dragged down GDP growth, thanks to strong performance in the service sector and domestic consumption, according to the National Bureau of Statistics. China’s GDP rose 6.8% in the fourth quarter following a steady 6.7% in the first three quarters.